Homeowners facing foreclosure sometimes pin their hopes on companies that claim they can stop a foreclosure by negotiating new mortgage terms with lenders. These companies are often called foreclosure consultants or mortgage assistance services. Unfortunately, some of these services are scams -- and homeowners end up losing their homes and lots of money too.
Congress passed the Mortgage Assistance Relief Services (MARS) in an effort to protect homeowners from foreclosure consultant scams. The federal law requires mortgage assistance relief service companies to disclose information about their services. Read on to learn more about the MARS rule and how it protects consumers from unscrupulous companies associated with mortgage assistance relief services.
(To learn more about how these scams work, and how to avoid them, see our Foreclosure Rescue Scams topic area.)
The MARS rule applies to mortgage assistance relief services companies. It defines “mortgage assistance relief service” as any service, plan, or program offered to a consumer to assist, or attempt to assist, the consumer with:
The rule requires certain disclosures, prohibits mortgage assistance relief services companies from taking advance fees, and bans certain untrue or misleading claims. Below are the details.
The MARS rule requires mortgage consultants to disclose specific information to consumers. In advertising to a general audience, companies must disclose that:
Companies also must explain in their in communications with prospective customers that:
Under the MARS rule, mortgage assistance relief services companies are not allowed to collect any fees until:
This means that even if you hire a company to help you, you are not required to pay a fee until they get results that you like. The company must also provide you with a written document from the lender or servicer that explains the key changes to your loan that would result if you accept the offer, as well as remind you that if you reject the offer you do not have to pay the company its fee.
Additionally, if you negotiate an alternative to foreclosure, like a loan modification, on your own, you are not required to pay the mortgage assistance relief services company’s fee.
Mortgage assistance relief services companies sometimes make misrepresentations to consumers to convince them to sign up for the company’s services. The MARS rule prohibits companies from making untrue or misleading claims about, among other things:
If a company makes claims about the benefits, performance, or effectiveness of the services they provide, they must be able to support those claims.
Example. If a company claims they can reduce your mortgage payment by 50%, this claim must accurately reflect the results they achieved for previous customers.
In addition, the MARS rule prohibits companies from telling consumers to stop communicating with their lender or loan servicer.
Attorneys that provide mortgage assistance relief services are generally exempt from the law. To be eligible for the exemption, the attorney must:
To be exempt from the prohibition on advance fees, an attorney must place any fees collected in a client trust account, withdraw fees only as they are earned, and abide by state regulations covering such accounts.
To learn more about the MARS rule, go to www.ftc.gov and search for “Mortgage Assistance Relief Services” to find links to further information.